<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                  FORM 10-QSB

(Mark One)

 X   Quarterly Report under Section 13 or 15(d) of the Securities Exchange
---  Act of 1934 For the quarterly period ended September 30, 1999.
                                                ------------------

                                      or

     Transition Report under Section 13 or 15(d) of the Securities Exchange Act
---  of 1934 For the transition period from _______________ to ________________.

                           Commission File No. 0-23980
                                               -------

                      Georgia Bank Financial Corporation
                      ----------------------------------
            (Exact name of registrant as specified in its charter)

          Georgia                                     58-2005097
          -------                                     ----------
 (State of Incorporation)                   (I.R.S. Employer Identification No.)

                   3530 Wheeler Road, Augusta, Georgia 30909
                   -----------------------------------------
                   (Address of principal executive offices)

                                (706) 738-6990
                                --------------
               (Issuer's telephone number, including area code)

                                Not Applicable
                                --------------
     (Former name, former address and former fiscal year, if changed since
                                 last report)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes  X   No
   -----   -----

                     APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

     2,093,152 shares of common stock, $3.00 par value per share, issued and
outstanding as of September 30, 1999.

     Transitional Small Business Disclosure Format (check one):
Yes          No  X
    -------    ------
<PAGE>

                         GEORGIA BANK FINANCIAL CORPORATION
                                    FORM 10-QSB
                                       INDEX

<TABLE>
<CAPTION>
                                                                                                                       Page
<C>              <S>                                                                                                   <C>
Part I
        Item 1.  Financial Statements (Unaudited)

                 Consolidated Balance Sheets as of September 30, 1999 and
                 December 31, 1998                                                                                        3
                 Consolidated Statements of Income for the quarters
                 ended September 30, 1999 and September 30, 1998 and the
                 nine months ended September 30, 1999 and September 30, 1998                                              4
                 Consolidated Statements of Cash Flows for the
                 nine months ended September 30, 1999 and September 30, 1998                                              5
                 Notes to Consolidated Financial Statements                                                               7

        Item 2.  Management's Discussion and Analysis of
                 Financial Condition and Results of Operations                                                            9

Part II  Other Information
        Item 1.  Legal Proceedings                                                                                        *
        Item 2.  Changes in Securities                                                                                    *
        Item 3.  Defaults Upon Senior Securities                                                                          *
        Item 4.  Submission of Matters to a Vote of Security-Holders                                                      *
        Item 5.  Other Information                                                                                        *
        Item 6.  Exhibits and Reports on Form 8-K                                                                         *

Signature                                                                                                                19
</TABLE>

* No information submitted under this caption

                                       1
<PAGE>

                                     PART I
                             FINANCIAL INFORMATION

                                       2
<PAGE>

               GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                          Consolidated Balance Sheets
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                              ASSETS
                                                                                           September 30,    December 31,
                                                                                                 1999          1998
                                                                                         -------------------------------
<S>                                                                                      <C>              <C>
Cash and due from banks                                                                   $  12,631,315   $    7,546,911
Federal funds sold                                                                            8,890,000        2,370,000
                                                                                         --------------   --------------
    Cash and cash equivalents                                                                21,521,315        9,916,911

Investment Securities
   Available-for-sale                                                                        59,426,474       58,919,609
   Held-to-maturity, at cost (fair values of
     $6,570,938 and $4,298,350, respectively)                                                 6,717,587        4,174,769

Loans                                                                                       235,512,962      208,967,142
   Less allowance for loan losses                                                            (3,457,453)      (2,714,638)
                                                                                         --------------   --------------
    Loans, net                                                                              232,055,509      206,252,504

Premises and equipment, net                                                                  10,568,679       11,025,425
Accrued interest receivable                                                                   2,671,168        2,111,933
Other real estate                                                                                16,942               --
Intangible assets, net                                                                          523,577          615,891
Other assets                                                                                  1,940,087        2,414,738
                                                                                         --------------   --------------
                                                                                          $ 335,441,338    $ 295,431,780
                                                                                         ==============   ==============

                                               LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
  Non-interest bearing                                                                     $ 43,863,774     $ 40,718,719
  Interest bearing
    NOW accounts                                                                             33,414,474       35,892,756
    Savings                                                                                  96,120,207       80,541,816
    Money management accounts                                                                15,393,131       15,546,821
    Time deposits over $100,000                                                              38,407,402       34,229,532
    Other time deposits                                                                      43,550,939       44,575,842
                                                                                         --------------   --------------
                                                                                            270,749,927      251,505,486

Federal funds purchased and securities sold
  under repurchase agreements                                                                18,362,167        2,714,257
Advances from Federal Home Loan Bank                                                         14,000,000        9,000,000
Other borrowed funds                                                                            950,000          900,000
Accrued interest and other liabilities                                                        2,181,517        2,684,965
                                                                                         --------------   --------------
        Total liabilities                                                                   306,243,611      266,804,708
                                                                                         --------------   --------------

Stockholders' equity
  Common Stock, $3.00 par value; 10,000,000 shares
    authorized; shares issued and outstanding of
    2,093,152 in 1999 and 1,820,368 in 1998                                                   6,279,456        5,461,104
  Additional paid-in capital                                                                 21,259,955       14,440,355
  Retained earnings                                                                           2,199,911        6,834,639
  Accumulated  other comprehensive income (loss)                                               (541,595)       1,890,974
                                                                                         --------------   --------------

          Total stockholders' equity                                                         29,197,727       28,627,072
                                                                                         --------------   --------------
                                                                                          $ 335,441,338    $ 295,431,780
                                                                                         ==============   ==============
</TABLE>

See notes to consolidated financial statements.

                                       3
<PAGE>

               GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                       Consolidated Statements of Income
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                               Three Months Ended           Nine Months Ended
                                                                                 September 30,                September 30,
                                                                           -------------------------------------------------------
                                                                              1999          1998           1999           1998
                                                                          ------------  ------------   ------------   ------------
<S>                                                                        <C>           <C>            <C>            <C>
Interest Income
  Loans, including fees                                                    $ 5,110,058   $ 4,596,021    $14,699,110    $13,227,284
  Investment securities                                                        979,550       866,322      2,784,763      2,476,254
  Federal funds sold                                                           123,298        89,035        274,630        305,310
                                                                          ------------  ------------   ------------   ------------
                                                                             6,212,906     5,551,378     17,758,503     16,008,848
                                                                          ------------  ------------   ------------   ------------
Interest Expense
  Deposits                                                                   2,572,955     2,353,723      7,259,536      6,736,442
  Federal funds purchased and securities sold
    under repurchase agreements                                                123,472        40,476        265,651        157,216
  Other borrowings                                                             138,673       141,024        439,167        414,887
                                                                          ------------  ------------   ------------   ------------
                                                                             2,835,100     2,535,223      7,964,354      7,308,545
                                                                          ------------  ------------   ------------   ------------

Net Interest Income                                                          3,377,806     3,016,155      9,794,149      8,700,303

Provision for loan losses                                                      591,000       200,000      1,015,000        580,000
                                                                          ------------  ------------   ------------   ------------

Net interest income after provision for loan losses                          2,786,806     2,816,155      8,779,149      8,120,303
                                                                          ------------  ------------   ------------   ------------

Non-interest Income
  Service charges and fees on deposits                                         736,706       676,704      2,162,580      1,940,933
  Gain on sale of loans                                                        163,935       264,219        592,313        674,539
  Investment securities gain, net                                            1,520,919         9,422      1,519,791          4,339
  Miscellaneous income                                                               -         8,373         11,943         20,529
                                                                          ------------  ------------   ------------   ------------
                                                                             2,421,560       958,718      4,286,627      2,640,340
                                                                          ------------  ------------   ------------   ------------

Non-interest Expense
  Salaries                                                                   1,137,050     1,096,717      3,438,980      3,166,542
  Employee benefits                                                            461,730       277,736      1,134,312        817,126
  Occupancy expenses                                                           414,548       426,918      1,232,707      1,213,248
  Other operating expenses                                                   1,266,780       743,057      2,697,002      2,074,074
                                                                          ------------  ------------   ------------   ------------
                                                                             3,280,108     2,544,428      8,503,001      7,270,990
                                                                          ------------  ------------   ------------   ------------

Income before income taxes                                                   1,928,258     1,230,445      4,562,775      3,489,653

Income tax expense                                                             593,500       455,000      1,559,551      1,323,000
                                                                          ------------  ------------   ------------   ------------

Net Income                                                                 $ 1,334,758   $   775,445    $ 3,003,224    $ 2,166,653
                                                                          ============  ============   ============   ============

Basic income per share                                                     $      0.64   $      0.37    $      1.43    $      1.04

Weighted average common shares outstanding                                   2,093,152     2,093,152      2,093,152      2,093,152
</TABLE>

See notes to consolidated financial statements.

                                       4
<PAGE>

               GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                     Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended September 30,
                                                                                   1999                    1998
                                                                             -----------------       -----------------
<S>                                                                          <C>                     <C>
Cash flows from operating activities
Net Income                                                                        $  3,003,224            $  2,166,653
  Adjustments to reconcile net income to net cash
    provided by operating activities
      Depreciation and amortization                                                    854,107                 778,222
      Provision for loan losses                                                      1,015,000                 580,000
      Net investment securities gains                                               (1,039,316)                 (4,339)
      Net amortization of premium on investment securities                              64,275                  35,937
      Gain on disposal of premises and equipment                                        (1,020)                (21,760)
      Gain on the sale of other real estate                                            (19,824)                (10,220)
      Gain on sale of loans                                                           (592,313)               (674,539)
      Real estate loans originated for sale                                        (26,592,477)            (33,240,554)
      Proceeds from sales of real estate loans                                      28,831,183              33,844,054
      Net increase in accrued interest receivable                                     (559,235)               (440,612)
      Net decrease in prepaid expense                                                  125,520                  48,289
      Net decrease (increase) in other assets                                        1,017,492                (806,540)
      Net increase (decrease) in accrued interest and other liabilities                139,813                (210,127)
                                                                             -----------------       -----------------
          Net cash provided by operating activities                                  6,246,429               2,044,464
                                                                             -----------------       -----------------

Cash flows from investing activities
      Proceeds from sales of available-for-sale securities                          15,349,100              20,915,204
      Proceeds from maturities of available-for-sale securities                     11,818,734                       -
      Proceeds from maturities of held-to-maturity securities                          280,112               1,151,577
      Purchase of held-to-maturity securities                                       (2,823,849)               (508,560)
      Purchase of available-for-sale securities                                    (30,654,130)            (28,206,173)
      Proceeds from redemption of FHLB stock                                           211,200                       -
      Net increase in loans                                                        (28,970,898)            (23,384,270)
      Net purchase of premises and equipment                                          (333,509)             (1,966,961)
      Proceeds from the sale of other real estate                                      509,382                 341,300
      Proceeds from the sale of premises and equipment                                  29,482                  51,712
                                                                             -----------------       -----------------
          Net cash used in investing activities                                    (34,584,376)            (31,606,171)
                                                                             -----------------       -----------------

Cash flows from financing activities
      Net increase in deposits                                                      19,244,441              31,159,923
      Net increase in federal funds purchased and
        securities sold under repurchase agreements                                 15,647,910                 304,709
      Proceeds from notes and bonds payable                                             50,000                       -
      Payments on notes and bonds payable                                                    -                (100,000)
      Advances from Federal Home Loan Bank                                          10,000,000               4,000,000
      Payments of Federal Home Loan Bank advances                                   (5,000,000)             (4,000,000)
                                                                             -----------------       -----------------
          Net cash provided by financing activities                                 39,942,351              31,364,632
                                                                             -----------------       -----------------
</TABLE>

                                       5
<PAGE>

               GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                     Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended September 30,
                                                                                   1999                    1998
                                                                             -----------------       -----------------
<S>                                                                          <C>                     <C>
          Net increase in cash and cash equivalents                                 11,604,404               1,802,925

Cash and cash equivalents at beginning of period                                     9,916,911              13,169,983

                                                                             -----------------       -----------------
Cash and cash equivalents at end of period                                         $21,521,315             $14,972,908
                                                                             =================       =================
Supplemental disclosures of cash paid during the period for:
       Interest                                                                    $ 8,396,255             $ 7,469,412
                                                                             =================       =================
       Income taxes                                                                $ 1,353,413             $ 1,506,402
                                                                             =================       =================
Supplemental disclosures of non-cash investing activities:
       Donation of Towne Services, Inc. common stock                                   480,000                     -0-
                                                                             =================       =================
</TABLE>

See notes to consolidated financial statements.

                                       6
<PAGE>

               GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY

                  Notes to Consolidated Financial Statements

                              September 30, 1999


Note 1 - Basis of Presentation

The accompanying financial statements include the accounts of Georgia Bank
Financial Corporation and its wholly-owned subsidiary, Georgia Bank & Trust
Company.  Significant intercompany transactions and accounts are eliminated in
the consolidation.

The financial statements for the nine months ended September 30, 1999 and 1998
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission.  Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes included in the Company's annual report on Form 10-KSB for the
year ended December 31, 1998.

In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods have been made. All such adjustments are of a normal recurring nature.
The results of operations are not necessarily indicative of the results of
operations which the Company may achieve for the entire year.

Note 2- Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133).  SFAS 133 is effective for
financial statements for all fiscal quarters of fiscal years beginning after
June 15, 1999. . In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging activities - Deferral of the effective date
of FASB Statement No. 133."  SFAS 133, as amended, is now effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000.  The Company
does not believe the provisions of SFAS 133 will have a significant impact on
the financial statements upon adoption.

In October 1998, the FASB issued Statement of Financial Accounting Standards No.
134, "Accounting for Mortgage Backed Securities Retained after the
Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise,
an amendment of FASB Statement No. 65" (SFAS 134).  SFAS 134 is effective for
the first quarter beginning after December 15, 1998.  The Company adopted SFAS
134 effective January 1, 1999.  Such adoption did not have a significant impact
on the financial statements.

Note 3 - Comprehensive Income

Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).  SFAS 130
establishes standards for reporting and displaying comprehensive income and its
components in a full set of general purpose financial statements.  The primary
component of the differences between net income and comprehensive income for the
Company is net unrealized gains and losses on investment securities.  Total
comprehensive income (loss) for the nine months ended September 30, 1999 was
$570,655 compared to $3,581,929 for the nine months ended September 30, 1998 and
for the three months ended September 30, 1999 was ($440,157) compared to
$2,216,806 for the three months ended September 30, 1998.

                                       7
<PAGE>

Note 4 - Shareholders' Equity

On July 22, 1999, the Company's Board of Directors approved a 15% stock dividend
payable on August 28, 1999 to shareholders of record on August 6, 1999.   All
weighted average share and per share information in the accompanying financial
statements has been restated to reflect the effect of the additional shares
outstanding resulting from the stock dividend.

                                       8
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

Performance Overview -- Net Income
----------------------------------

The Company's net income for the third quarter of 1999 was $1,335,000, which was
an increase of $559,000 (72.1%) compared to net income of $775,000 for the third
quarter of 1998.  Earnings per share for the quarter were $0.64 in 1999 compared
to $0.37 in 1998.  Net income for the first nine months of 1999 was $3,003,000,
an increase of $837,000 (38.6%) above net income of $2,167,000 for the first
nine months of 1998.  Total assets of $335.4 million reflects an increase of
$12.0 million for the quarter  an increase of $48.4 million (16.9%) over
September 30, 1998.and  an increase of $40.0 million (13.5%) from year-end 1998.

For the third quarter of 1999, as compared to the third quarter of 1998, the
increase in net income resulted from an increase in net interest income of
$362,000 and an increase in non-interest income of $1,463,000.  The increase in
non-interest income resulted from the gain on sale and the donation of equity
securities of approximately $1,811,000 during the third quarter (see Investment
Securities Gains and Losses).The total of the increases in income was reduced by
an increase in non-interest expense of $736,000 and an increase in the provision
for loan losses to $591,000, an increase of $391,000 from the prior year quarter
of $200,000.  This higher level of provision for loan losses is in response to
the continuing increases in loans outstanding and the changing mix in the loan
portfolio.  The net impact of these changes was an increase in income before
taxes of $698,000.   The provision for income taxes was $594,000, an increase of
$139,000 from the prior year third quarter.

The return on average assets for the Company was 1.25% for the nine months ended
September 30, 1999, compared to 1.08% for the same period last year.  The return
on average stockholders' equity was 13.60%, versus 12.32% for the comparable
period in 1998.

Net Interest Income
-------------------

Net interest income increased $362,000 (12.0%) over the third quarter of 1998
and $1,094,000 (12.6%) during the first nine months over the comparable period
in 1998, primarily due to increases in loans outstanding as the earning asset
mix has improved with a higher ratio of loans to total assets.  Interest earning
assets increased $10.2 million (3.4%) over the  second quarter of 1999, and
$47.3 million (18.0%) over September 30, 1998.  Loans, historically the highest
yielding component of interest earning assets, increased $10.8 million (4.8%)
during the quarter, and $39.8 million (20.0%) over the comparable period in
1998.  Investment securities decreased $5.1 million (7.2%) during the quarter,
and increased $2.9 million (4.6%) over the comparable period in 1998.  This
decrease in investment securities during the quarter reflects the sale of
securities to fund the increasing loan portfolio, to increase liquidity in
preparation for Year 2000 liquidity projections and the sale and donation of the
common stock  of Towne Services, Inc.  Federal funds sold increased $4.6 million
for the third quarter, and $4.3 million from September 30, 1998.

                                       9
<PAGE>

Interest Income
---------------

Interest income increased $662,000 (11.9%) over the third quarter of 1998 and
$1,750,000 (10.9%) during the first nine months of 1999 over the comparable
period in 1998.  Interest income on loans increased $514,000 (11.2%) over the
third quarter of 1998 and $1,472,000 (11.1%) during the first nine months of
1999 over the comparable period in 1998.  These increases are the result of
significantly higher loan volumes.  Interest income earned on investment
securities increased $113,000 (13.1%) over the third quarter of 1998 and
$309,000 (12.5%) during the first nine months of 1999 over the comparable period
in 1998, reflecting the higher volume of investment securities for the nine-
month period. Interest income from Federal funds sold increased $34,000 (38.5%)
over the third quarter of 1998 and decreased $31,000 (10.0% ) during the first
nine months over the comparable period in 1998. Federal funds sold are being
maintained at higher levels during the third and fourth quarters of 1999 in
order to fund any Year 2000 cash needs that may arise.

Interest Expense
----------------

Interest expense increased $300,000 (11.8%) over the third quarter of 1998 and
$656,000 (9.0%) over the nine months ended September 30, 1998.  Interest expense
on deposits increased $219,000 (9.3%) over the third quarter of 1998 and
$523,000 (7.8%) over the comparable nine month period in 1998.  Interest expense
on Federal funds purchased and securities sold under repurchase agreements
increased $83,000 (205.0%) over the third quarter of 1998 and increased $108,000
(69.0%) over the nine months ended September 30, 1998.  Interest expense on
borrowings decreased $2,000 (1.7%) over the third quarter of 1998 and increased
$24,000 (5.9%) over the comparable nine months ended September 30, 1998.  All
increases reflect higher levels of deposits, Federal funds purchased and
securities sold under repurchase agreements, and  borrowings which consist of
Federal Home Loan Bank advances. The Company increased its borrowings from the
Federal Home Loan Bank by $5 million during the third quarter of 1999 to support
loan growth.

Non-interest Income
-------------------

Non-interest income (excluding investment securities gains and losses) decreased
$49,000 (5.1%) below the third quarter of 1998 and increased $131,000 (5.0%)
above the comparable 1998 nine-month period.  The increase in deposit accounts
resulted in increased service charges and fees on deposits and increases in
retail investment income, while fee income from origination and sale of
mortgages in the secondary market decreased  when compared to both the quarter
and nine-month period ended September 30, 1998. The decrease in fee income from
origination and sale of mortgages in the secondary market is due to lower
volumes resulting from  rising interest rates and a significant reduction in
mortgage refinancings.  Demand deposits increased $7.1 million (19.4%) over
September 30, 1998.  Total deposits increased $29.4 million (12.2%) over
September 30, 1998.  See Investment Securities Gains and Losses for a discussion

                                      10
<PAGE>

of the sale and charitable contribution of Towne Services, Inc. common stock by
the Company during the third quarter.

Non-interest Expense
--------------------

Non-interest expense increased $736,000 (28.9%) over the third quarter of 1998
and  $1,232,000 (16.9%) over the first nine months of 1998. Increases for the
respective periods are attributable to increases in salary and benefits expense
of $224,000 (16.3%) and $590,000 (20.5%) respectively, a decrease in occupancy
expense of $12,000 (2.9%) over the third quarter of 1998 and an increase of
$19,000 (1.6%) over the comparable nine months in 1998, and increases in other
operating expenses of $524,000 (70.5%) and $623,000 (30.0%), respectively.

The increases in salary and benefits expense for both the quarter and nine-month
period are the result of the continued expansion in the Company's local market
that is reflected in additions to staff.  Also, increasing levels of
compensation are commissions which are based upon production such as the
mortgage and retail investment functions.  Decreased occupancy expenses for the
third quarter is attributable to expense control and full depreciation of  some
of the Company's assets.  The increase in other operating expenses is
attributable to the $480,000 charitable contribution  of Towne Services, Inc.
common stock to Georgia Bank Foundation, Inc. (see Investment Securities Gains
and Losses), Year 2000 expenses, and expenses related to the stock dividend paid
during the third quarter of 1999.

Income Taxes
------------

Income taxes in the third quarter of 1999 totaled $594,000, an increase of
$139,000 over the third quarter of 1999 and an increase of $237,000 from the
comparable nine month period in 1998.  The effective tax rate for the nine
months ended September 30, 1999 and 1998 was 34.2% and 37.9%, respectively.  The
effective tax rate  decreased as a result of the charitable contribution of
Towne Services, Inc. common stock previously mentioned.

Investment Securities Gains and Losses
--------------------------------------

During the quarter, the Company took losses on the sale of investment securities
totaling $291,000 in addition to the gain from the sale and donation of Towne
Services, Inc. common stock. In the face of a rising interest rate environment,
the Company sold certain investments and reinvested in higher yielding
investment securities. These reinvestments will position the Company for
improved returns on the investment securities portfolio over the next several
years. By comparison, the effective yield on the investment securities portfolio
was 6.08% at September 30, 1999 versus 5.82% at June 30, 1999.

In 1996 and 1997, the Company made equity investments totaling $150,000 in Towne
Services, Inc.  These investments were for the purpose of providing Towne
Services, Inc. with capital to acquire and implement a processing system for
equipment and vehicle leasing.  Towne Services, Inc, also provides services for
an automated asset management (accounts receivable) system.   Until July 1998 no
public market existed for the stock of Towne Services, Inc.  During the third
quarter of 1999, the Company sold 223,500 shares and donated an additional
125,000 shares of

                                      11
<PAGE>

Towne Services, Inc. common stock to a charitable foundation. The gain
recognized on the sale and donation of Towne Services, Inc. stock was
$1,811,000. At September 30, 1999, the Company owned 34,900 shares of Towne
Services, Inc. common stock with a market value of $113,000. This unusual sale
of equity securities represents a non-recurring gain that positively impacts the
financial performance of the Company.

Asset Quality
-------------

The table on page 16 shows the current and prior period amounts of non-
performing assets.  Non-performing assets were $2.1 million at September 30,
1999, compared to $2.9 million at December 31, 1998 and $1.9 million at
September 30, 1998.  The ratio of non-performing assets to total loans and other
real estate was 0.89% at September 30, 1999, compared to 1.40% at December 31,
1998 and 0.99% at September 30, 1998.  The control and monitoring of non-
performing assets continues to be management priority.

Loans past due 90 days or more and still accruing were $25,000 at September 30,
1999 compared to $44,000 at December 31, 1998 and $396,000 at September 30,
1998.

Additions to the allowance for loan losses are made periodically to maintain the
allowance at an appropriate level based upon management's analysis of potential
risk in the loan portfolio.  The amount of the loan loss provision is determined
by an evaluation of the level of loans outstanding, the level of non-performing
loans, historical loan loss experience, delinquency trends, the amount of actual
losses charged to the allowance in a given period, and an assessment of economic
conditions.  A provision for losses in the amount of $591,000 was charged to
expense for the quarter ended September 30, 1999.  This increase in the
provision for losses reflects continued growth of the loan portfolio, higher net
chargeoffs in 1999 ($273,000 in 1999 versus $159,000 in 1998), a change in the
loan portfolio mix as the Bank has originated higher levels of consumer
installment loans and an overall concern regarding a general softening of the
economy in the Company's market.  At September 30, 1999, the ratio of allowance
for loan losses to total loans was 1.47%, an increase from 1.30% at December 31,
1998 and 1.29% at September 30, 1998.  Management considers the current
allowance for loan losses appropriate based upon its analysis of the potential
risk in the portfolio, although there can be no assurance that the assumptions
underlying such analysis will continue to be correct.

Liquidity and Capital Resources
-------------------------------

The Company's liquidity remains adequate to meet operating and loan funding
requirements.  The loan to deposit ratio at September 30, 1999 was 87.0%
compared to 83.1% at December 31, 1998 and 81.2% at September 30, 1998.  The
increasing level of the loan to deposit ratio reflects that loans continue to
grow at a  faster rate than deposits.  Loans increased $10.8 million during the
quarter and $39.8 million when compared to the nine-month period in 1998 while
deposits increased $5.7 million during the quarter and increased $29.4 million
when compared to the nine months ended September 30, 1998.  The loan to total
asset ratio for September 30, 1999 was 70.2% versus 70.7% at December 31, 1998
and 68.2% at September 30, 1998.

                                      12
<PAGE>

Stockholders' equity to total assets was 8.70% at September 30, 1999 compared to
9.69% at December 31, 1998.  This decrease reflects the growth of the Company
during the first nine months of the year.  The capital of the Company and the
Bank exceeded all required regulatory guidelines at September 30, 1999.  The
Company's Tier 1 risk-based, total risk-based and the leverage capital ratios
were 11.14%, 12.41%, and 8.83%, respectively, at September  30, 1999.  The
schedule on page 17 reflects the current regulatory capital levels in more
detail, including comparisons to the regulatory minimums.


Year 2000 Issue
---------------

The Company recognizes the scope and potential problems associated with the Year
2000 compliance program.  The Company has adopted a plan of action and has in
place a team of key managers to define and implement steps to address the
problem for all of the Company's mission critical systems and hardware including
embedded chip devices.  The Company has progressed through the awareness,
assessment and renovation phases and is well into the validation phase where
testing is conducted and results analyzed to confirm the changes made to bring
the affected system into compliance and that no problems surface as a result of
the changes.  The validation of mission critical systems was complete by June
30, 1999.  In addition to systems compliance, the Company has evaluated all
significant credit customer relationships to determine any risks represented to
the Company by the impact of Year 2000 on customer operations.  Based upon this
evaluation, the Company is not aware of more than the normal credit risk
associated with these relationships and no special additions to the allowance
for loan losses are believed to be necessary.  Also, the Company has
incorporated Year 2000 compliance into its Loan Policy, underwriting standards
and loan documentation.

In addition to assessing the Company's information technology system and the
risks of customer credit relationships, the Company has also assessed it
electronic equipment, such as building security, environmental systems and other
devices which contain embedded electronic circuits.  With regards to these non-
information technology systems, the Company believes it was  in substantial Year
2000 compliance as of June 30, 1999.

The management of the Company expects to incur total expenses of approximately
$450,000, of which $250,000 was budgeted for 1998 and $200,000 for 1999, to
modify its information systems appropriately to accurately process information
for the year 2000 and beyond. In 1998, the Company incurred costs of $332,000
for the replacement of non-compliant hardware and software.  For the first nine
months of 1999, the Company has incurred costs of $90,000 related to systems
testing, review and testing of contingency plans and implementation of a
communications plans for customers, shareholders and the general public.  The
associated costs of certain replacement systems have been recorded as assets and
amortized. Other ongoing costs such as personnel expense for testing are being
expensed as incurred.  Management expects that the costs to convert the
Company's information systems to Year 2000 compliance will not have material
impact on the Company's consolidated financial statements or results of
operations.  The costs of the Year 2000 project are based upon management's best
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of

                                       13
<PAGE>

certain resources, third party modification plans and other factors. There can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.

While not anticipated at this time, the Company could potentially experience
disruptions to some aspects of its various activities and operations as a result
of non-compliant systems utilized by the Company or unrelated third parties.
Contingency plans have been developed to mitigate the extent of any such
disruption to business operation.  The Company's contingency plans were complete
as of June 30, 1999.  The Company completed the manual testing components of the
contingency plans   as of August 31, 1999.

In its efforts to achieve Year 2000 compliance, as of September  30, 1999, the
Company believes it has met all the regulatory requirements of the Federal
Financial Institutions Examination Council ("FFIEC").

Effects of Inflation and Changing Prices
----------------------------------------

Inflation generally increases the cost of funds and operating overhead and to
the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction and to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. In addition, inflation can increase a
financial institution's cost of goods and services purchased, the cost of
salaries and benefits, occupancy expense and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect liquidity, earnings, and
stockholders' equity. Mortgage originations and refinancings tend to slow as
interest rates increase, and can reduce the Company's earnings from such
activities and the income from the sale of residential mortgage loans in the
secondary market.

Forward-Looking Statements
--------------------------

The Company may, from time-to-time, make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
shareholders.  Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties.  Such forward-looking statements are made based
upon management's belief as well as assumptions made by, and information
currently available to, management pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995.  The Company's actual results
may differ materially from the results anticipated in forward-looking statements
due to a variety of factors, including governmental monetary and fiscal
policies, deposit levels, loan demand, loan collateral values,

                                       14
<PAGE>

securities portfolio values, and interest rate risk management; the effects of
competition in the banking business from other commercial banks, savings and
loan associations, mortgage banking firms, consumer finance companies, credit
unions, securities brokerage firms, insurance companies, money market mutual
funds and other financial institutions operating in the Company's market area
and elsewhere, including institutions operating through the Internet; changes in
governmental regulation relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for loan losses, including the value of collateral
underlying delinquent loans, and other factors. The Company cautions that such
factors are not exclusive. The Company does not undertake to update any
forward-looking statement that may be made from time to time by, or on behalf
of, the Company.

                                       15
<PAGE>

               GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
                          CONSOLIDATED FINANCIAL DATA
                            (Dollars in Thousands)
                                  (Unaudited)

                                                 Nine Months Ended September 30,
                                                 -------------------------------
PROFITABILITY                                         1999             1998
-------------                                      ----------        -------

Return on average assets *                              1.25%           1.07%

Return on average equity *                             13.60%          11.49%

ALLOWANCE FOR LOAN LOSSES
-------------------------

Beginning balance, January 1                          $2,715          $2,097
Provision charged to expense                           1,015             580
Recoveries                                                70              88
Loans charged off                                        343             247
Ending balance, September 30                          $3,457          $2,518

<TABLE>
<CAPTION>

NON-PERFORMING ASSETS             September 30, 1999    December 31, 1998   September 30, 1998
---------------------
<S>                                   <C>                      <C>              <C>
Non-accrual loans                          $2,082                 $2,925              $1,928
Other real estate owned                        17                     --                  --
Restructured loans                             --                     --                  --
                                    -------------           ------------        ------------
Total non-performing assets                $2,099                 $2,925              $1,928
                                    =============           ============        ============

LOANS PAST DUE 90 DAYS OR
MORE AND STILL ACCRUING                    $   25                 $   44              $  396
                                    =============           ============        ============
</TABLE>
*  Annualized

                                       16
<PAGE>

                       Georgia Bank Financial Corporation
                                       and
                          Georgia Bank & Trust Company
                        Regulatory Capital Requirements
                               September 30, 1999
                             (Dollars in Thousands)

<TABLE>
<CAPTION>

                                 Actual                Required            Excess
                             Amount  Percent       Amount  Percent     Amount  Percent
                           ------------------    ------------------    ---------------
<S>                        <C>       <C>         <C>       <C>         <C>     <C>
Georgia Bank Financial Corporation

Risk-based capital:
   Tier 1 capital           $29,215    11.14%      10,487     4.00%    18,728     7.14%
   Total capital             32,540    12.41%      20,975     8.00%    11,565     4.41%
Tier 1 leverage ratio        29,215     8.83%      13,241     4.00%    14,608     4.83%


Georgia Bank & Trust Company

Risk-based capital:
   Tier 1 capital           $26,965    10.38%      10,392     4.00%    16,573     6.38%
   Total capital             30,215    11.63%      20,784     8.00%     9,431     3.63%
Tier 1 leverage ratio        26,965     8.22%      13,126     4.00%    13,839     4.22%
</TABLE>

                                       17
<PAGE>

                                    PART II

                               OTHER INFORMATION

Item 1.         Legal Proceedings.

        There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party or to which any of their property is subject.

Item 2.         Changes in Securities.

        (a)  Not applicable

        (b)  Not applicable

        (c)  Not applicable

        (d)  Not applicable

Item 3.         Defaults Upon Senior Securities.

        Not applicable.

Item 4.         Submission of Matters to a Vote of Security-Holders.

        None.

Item 5.         Other Information.

        None.

Item 6.         Exhibits and Reports on Form 8-K.

        (a)  Exhibits

             27 Financial Data Schedule

        (b)  Reports on Form 8-K

             None.

                                       18
<PAGE>

                      GEORGIA BANK FINANCIAL CORPORATION
                            Form 10-QSB Signatures

          Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                           GEORGIA BANK FINANCIAL CORPORATION



Date:     November 8, 1999       By:    /s/ Ronald L. Thigpen
    ----------------------         ----------------------------------------
                                 Ronald L. Thigpen
                                 Executive Vice President, Chief Operating
                                 Officer (Duly Authorized Officer of
                                 Registrant and Principal Financial Officer)

                                       19